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Correction and changes in disclosures | 12 Months Ended
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Dec. 31, 2017
Text block1 [abstract] |
Correction and changes in disclosures |
5. | Correction and changes in disclosures
5.1 | Restatement of previous issues financial statements
In connection with the implementation of the new accounting standard IFRS 16 Leases, the Company concluded its prior accounting for flight equipment with respect to the identification of the built-in maintenance events at initial recognition was incorrect. These initial built-in maintenance components should have been depreciated over a shorter life then the lives assigned for the core airframe and engines, specifically, the time period until the first maintenance event was performed with any remaining value derecognized and charged to expense at the time of the major maintenance event. However, the Company instead had included such components in airframe and engines assets, and depreciated with the same useful life. The restatement reflects the corrected amortization of these initial maintenance components and derecognizes any remaining balance of each such component at the moment of the capitalization of the next maintenance event, if any. In addition, the Company corrected other previously identified differences, including an error in the valuation method of foreign currency in certain local tax accounts, which resulted the Company recognized an unrealized foreign currency gain on translation of $11 million in 2017, and the Company corrected for the discount rate used to calculate the present value of the provision for return condition in 2017. The Company’s operating leases provide that the Company is contractually obliged to return aircraft in an agreed-upon condition (see note 21). The tables below reflects each of the affected financial statement line items for the prior periods, as follows: Impact on the statement of financial position (increase/(decrease)):
|  | 2017 |  |  | 2016 |
ASSETS |  |  |  |  |  |  |  |
Non - current assets |  |  |  |  |  |  |  |
Property and equipment |  | $ | (208,497 | ) |  | $ | (205,518 | )
Deferred tax assets |  |  | 527 |  |  |  | — |
Total assets |  | $ | (207,970 | ) |  | $ | (205,518 | )
LIABILITIES AND EQUITY |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |
Taxes and interest payable |  |  | (11,363 | ) |  |  | — |
Non-current liabilities |  |  |  |  |  |  |  |
Other long-term liabilities |  |  | 7,439 |  |  |  | — |
Deferred tax liabilities |  |  | 1,837 |  |  |  | — |
Total liabilities |  |  | (2,087 | ) |  |  | — |
Equity |  |  |  |  |  |  |  |
Retained earnings |  |  | (205,518 | ) |  |  | (196,902 | )
Net income |  |  | (365 | ) |  |  | (8,616 | )
Total equity |  |  | (205,883 | ) |  |  | (205,518 | )
Total liabilities and equity |  | $ | (207,970 | ) |  | $ | (205,518 | )
Impact on the statement of profit or loss (increase/(decrease)):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Maintenance, materials and repairs |  | $ | 7,439 |  |  | $ | — |  |  | $ | — |
Depreciation and amortization |  |  | 2,979 |  |  |  | 8,616 |  |  |  | 15,660 |
|  |  | 10,418 |  |  |  | 8,616 |  |  |  | 15,660 |
Operating profit |  |  | (10,418 | ) |  |  | (8,616 | ) |  |  | (15,660 | )
Non-operating income (expense) |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on foreign currency fluctuations |  |  | 11,363 |  |  |  | — |  |  |  | — |
Profit (loss) before taxes |  |  | 945 |  |  |  | (8,616 | ) |  |  | (15,660 | )
Income tax expense |  |  | (1,310 | ) |  |  | — |  |  |  | — |
Net profit (loss) |  | $ | (365 | ) |  | $ | (8,616 | ) |  | $ | (15,660 | )
Earnings (loss) per share |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted |  | $ | (0.01 | ) |  | $ | (0.21 | ) |  | $ | (0.36 | )
The change did not have a material impact on the consolidated statement of comprehensive income (loss) for the period. The impact on the statement of cash flows for the year ended December 31, 2017, 2016 and 2015, only relates to the changes in the net profit by the adjustment in the depreciation expense and working capital items. There was no impact on the net cash flows from operating activities. The cash flows from investing and financing activities were not affected. The following notes are restated by the correction of the error: 3(j), 13, 21, 22, 26 and 28.6.
5.2 | Change in accounts classifications
Consolidated statement of financial position As disclosed in the table below, certain retrospective corrections have been made to the December 31, 2016 consolidated statement of financial position to conform to the 2017 presentation. The movement between current and non-current liabilities corresponds to the classification to non-current liabilities of a portion of the provision for maintenance. This provision include the accrual of formal agreements with third parties for operational maintenance events, the Company has determined that a part of this provision is not going to be settled within 12 months after the reporting period. Additionally, the Company is adjusting the presentation of the prepaid income tax, previously presented within taxes and interest payables. The following table reconcile the changes in presentation in prior years for comparative effects on the consolidated statement of financial position:
|  | As previosly reported |  |  | Reclasification |  |  | 2016 (Adjusted) |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Taxes and interest payable |  | $ | 47,389 |  |  | $ | 21,094 |  |  | $ | 68,483 |
Accrued expenses payable |  | $ | 80,116 |  |  | $ | (35,754 | ) |  | $ | 44,362 |
Income tax payable |  | $ | 22,495 |  |  | $ | (21,094 | ) |  | $ | 1,401 |
Non-current liabilities |  |  |  |  |  |  |  |  |  |  |  |
Other long-term liabilities |  | $ | 72,694 |  |  | $ | 35,754 |  |  | $ | 108,448 |
Consolidated statement of profit or loss The Company has historically presented its IFRS consolidated statement of profit or loss “by nature and function on a ‘mixed basis” as permitted by IAS 1. During February 2017, the Company introduced a new business, planning and financial consolidation accounting system, with the objective of improving and giving greater uniformity to the structure and presentation of the consolidated financial statements. While the Company continues to present its consolidated income statement “by nature and function on a ‘mixed basis”, a new chart of accounts was implemented resulting in the reclassification of certain lines in the consolidated financial statements, as well as certain new financial statement line items. In the accompanying consolidated statements, prior periods have been retrospectively reclassified giving effect to the new classifications. The Company does not believe these reclassifications significantly affect its previously reported financial statements, nor do they have any significant impact on previously reported Key Performance Indicators (KPIs) or debt covenant compliance. There was also no impact on the Company’s basic or diluted earnings per share and no impact on the total operating, investing or financing cash flows for the years ended December 31, 2016 and 2015. The following tables discloses both previously reported and as adjusted amounts of the consolidated statement of profit or loss:
|  | 2016 |
|  | Adjusted |
Operating revenue |  |  |  |
Passenger revenue |  | $ | 2,155,167 |
Cargo and mail revenue |  |  | 53,989 |
Other operating revenue |  |  | 12,696 |
|  |  | 2,221,852 |
Operating expenses |  |  |  |
Fuel |  |  | 528,996 |
Wages, salaries, benefits and other employees’ expenses |  |  | 370,190 |
Passenger servicing |  |  | 86,329 |
Airport facilities and handling charges |  |  | 159,771 |
Sales and distribution |  |  | 193,984 |
Maintenance, materials and repairs |  |  | 121,781 |
Depreciation and amortization |  |  | 167,894 |
Flight operations |  |  | 88,188 |
Aircraft rentals and other rentals |  |  | 138,885 |
Cargo and courier expenses |  |  | 6,099 |
Other Operating and administrative expenses |  |  | 92,215 |
|  |  | 1,954,332 |
Operating profit |  |  | 267,520 |
Non-operating income (expense) |  |  |  |
Finance cost |  |  | (37,024 | )
Finance income |  |  | 13,000 |
(Loss) Gain on foreign currency fluctuations |  |  | 13,043 |
Net change in fair value of derivatives |  |  | 111,642 |
Other non-operating expense |  |  | (3,982 | )
|  |  | 96,679 |
Profit (loss) before taxes |  |  | 364,199 |
Income tax expense |  |  | (38,271 | )
Net profit (loss) |  | $ | 325,928 |
|  | 2016 Previously |
|  | Reported |
Operating revenue |  |  |  |
Passenger revenue |  | $ | 2,133,186 |
Cargo, mail and other |  |  | 88,663 |
|  |  | 2,221,849 |
Operating expenses |  |  |  |
Aircraft fuel |  |  | 527,918 |
Salaries and benefits |  |  | 293,044 |
Passenger servicing |  |  | 259,524 |
Commissions |  |  | 83,981 |
Reservations and sales |  |  | 99,918 |
Maintenance, material and repairs |  |  | 122,873 |
Depreciation, amortization and impairment |  |  | 167,894 |
Flight operations |  |  | 127,777 |
Aircraft rentals |  |  | 120,841 |
Landing fees and other rentals |  |  | 55,498 |
Other |  |  | 94,584 |
|  |  | 1,953,852 |
Operating profit |  |  | 267,997 |
Non-operating income (expense) |  |  |  |
Finance cost |  |  | (37,024 | )
Finance income |  |  | 13,000 |
Exchange rate difference, net |  |  | 13,043 |
Mark to market derivative income (expense) |  |  | 111,642 |
Other income |  |  | 2,888 |
Other expense |  |  | (7,347 | )
|  |  | 96,202 |
Profit (loss) before taxes |  |  | 364,199 |
Income tax expense |  |  | (38,271 | )
Net profit (loss) |  | $ | 325,928 |
|  | 2015 |
|  | Adjusted |
Operating revenue |  |  |  |
Passenger revenue |  | $ | 2,185,465 |
Cargo and mail revenue |  |  | 56,738 |
Other operating revenue |  |  | 11,507 |
|  |  | 2,253,710 |
Operating expenses |  |  |  |
Fuel |  |  | 603,760 |
Wages, salaries, benefits and other employees’ expenses |  |  | 373,631 |
Passenger servicing |  |  | 84,327 |
Airport facilities and handling charges |  |  | 148,078 |
Sales and distribution |  |  | 188,961 |
Maintenance, materials and repairs |  |  | 111,178 |
Depreciation and amortization |  |  | 150,548 |
Flight operations |  |  | 86,461 |
Aircraft rentals and other rentals |  |  | 142,177 |
Cargo and courier expenses |  |  | 6,471 |
Other Operating and administrative expenses |  |  | 105,484 |
|  |  | 2,001,076 |
Operating profit |  |  | 252,634 |
Non-operating income (expense) |  |  |  |
Finance cost |  |  | (33,155 | )
Finance income |  |  | 25,947 |
(Loss) Gain on foreign currency fluctuations |  |  | (440,097 | )
Net change in fair value of derivatives |  |  | (11,572 | )
Other non-operating expense |  |  | (1,632 | )
|  |  | (460,509 | )
Profit (loss) before taxes |  |  | (207,875 | )
Income tax expense |  |  | (32,759 | )
Net profit (loss) |  | $ | (240,634 | )
|  | 2015 |
|  | Previously Reported |
Operating revenue |  |  |  |
Passenger revenue |  | $ | 2,166,727 |
Cargo, mail and other |  |  | 83,335 |
|  |  | 2,250,062 |
Operating expenses |  |  |  |
Aircraft fuel |  |  | 602,777 |
Salaries and benefits |  |  | 289,512 |
Passenger servicing |  |  | 258,302 |
Commissions |  |  | 88,557 |
Reservations and sales |  |  | 88,051 |
Maintenance, material and repairs |  |  | 111,181 |
Depreciation, amortization and impairment |  |  | 150,548 |
Flight operations |  |  | 130,930 |
Aircraft rentals |  |  | 122,217 |
Landing fees and other rentals |  |  | 56,703 |
Other |  |  | 100,856 |
|  |  | 1,999,634 |
Operating profit |  |  | 250,428 |
Non-operating income (expense) |  |  |  |
Finance cost |  |  | (33,155 | )
Finance income |  |  | 25,947 |
Exchange rate difference, net |  |  | (440,097 | )
Mark to market derivative income (expense) |  |  | (11,572 | )
Other income |  |  | 7,025 |
Other expense |  |  | (6,451 | )
|  |  | (458,303 | )
Profit (loss) before taxes |  |  | (207,875 | )
Income tax expense |  |  | (32,759 | )
Net profit (loss) |  | $ | (240,634 | )
5.3 | Adoption of new and amended standards and interpretations
The Company applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after January 1, 2017. The Company has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
| • |  | Amendments to IAS 7 Statement of cash flows: disclosure initiative
The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Company has provided the information for the current period in note 18.
| • |  | Other standards
The following amendments effective for annual periods beginning on or after January 1, 2017, had no impact on the Company’s financial statements: Annual Improvements Cycle—2014-2016: IFRS 12 ’Disclosure of interests in other entities’ regarding clarification of the scope of the standard. Amendments to IAS 12 Income Taxes: recognition of deferred tax assets for unrealized losses

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